Ask Our Experts 10/13/19: Industry Revenues After Federal Legalization


Q: With more conversations about national reforms being had in Washington, D.C., what was the takeaway from your new report regarding the nationwide forecast for jobs and taxes pending federal legalization?

By New Frontier Data

A: In gathering the research presented in New Frontier Data’s recent release, Cannabis in the U.S. Economy: Jobs, Growth and Tax Revenue (2019 Edition), projections were based on the current economic impacts shaping the federal tax revenues and jobs associated with the legal cannabis market as it currently exists. A model was also devised to examine the scenario in which a fully deployed federally legal program were already in place across all 50 states.

In the current legal structure, there are approximately 340,000 jobs (direct and indirect, but not induced) associated with the cannabis industry. Under a fully federal legalized system (even with a residual by a less significant illicit market), cannabis-associated jobs would include 1.46 million in 2019, growing to more than 1.6 million jobs by 2025.

That level of economic activity includes those revenues associated with the “plant-touching” supply chain, and represents roughly 50% of the industry total derived from cannabis businesses.

Such are not the only business revenues associated with the cannabis industry, explained Beau Whitney, New Frontier Data’s Senior Economist. “This revenue, while significant, does not include ancillary businesses that support the cannabis industry, such as accountants, security services, or legal representation. If ancillary businesses were included, the economic reach of cannabis would be far greater.”

Whitney added that many other policy implications are associated with such a level of economic activity, most notably 280e business taxes and banking. In the current legal structure, cannabis plant-touching businesses will end up paying approximately $12.3 billion more in business taxes when compared to taxes paid by traditional businesses with the same revenues and expenses, a variance equivalent to 204,000 jobs. The full federal legalization scenario assumes the 280e issue to be resolved through legislation.

Examining the potential of the entire cannabis supply chain from a revenue perspective offers a deeper understanding of the extent to which cannabis can contribute significantly to the U.S. economy.